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Tag Archives: Vodafone

Apologies for the extended summer break (not for the lack of thoughts or developments, though).

Let’s begin with a recap of what’s been happening for India at the international stage over the summer:

The ICJ and Justice Bhandari’s election:

1. Justice Bhandari was finally sworn-in as a judge of the International Court of Justice on 19 June 2012 (right before the Diallo judgment was read). For those interested, here’s a photo of Justice Bhandari being sworn in, and a video of him making the (rather short) solemn declaration (the oath).

2. On the debate surrounding Justice Bhandari’s nomination (see this for some background), two main criticisms have been leveled against Justice Bhandari’s nomination by India for the ICJ. The first, as reflected here, argues that as a national judge with little or no real experience in international law, Justice Bhandari’s nomination by the Indian national group of the PCA reflected absurd decision making. From an international legal perspective, the underlying assumption of this view is thus: “a judge may be well-versed with domestic legal traditions, but one assumes that a Judge at the International Court of Justice, the principal judicial organ of the United Nations, responsible for adjudicating on questions of international law (Article 38), would possess knowledge of international law!” The second criticism, as argued by Arghya Sengupta in an OpEd in The Hindu, takes issue with the nomination of Justice Bhandari, a sitting Supreme Court Judge, by the government of India on grounds of undermining the independence of the Supreme Court Judge (Justice Bhandari). As much as I understand, and perhaps even agree with, some of the sentiments behind these arguments, I still disagree with several individual arguments inherent in these criticisms, especially in light of the rather inchoate state of the international legal profession in India. However, I’d save my thoughts on this for later.

3. I’ve blogged about a right to Information application seeking information on Justice Bhandari’s nomination earlier. In response, the Ministry of External Affairs denied some information on Justice Bhandari’s nomination on the ground that the RTI Act allows withholding information related to strategic interests of the country, and besides it would also affect canvassing for Justice Bhandari. Now, the Central Information Commission has asked the MEA to provide the requested information. Interestingly, the CIC has also asked for the Indian national group of the PCA to answer some of the queries (could an argument be made here that the national group is not a “public authority” for the purposes of the RTI Act?).

Moving on to the Enrica Lexie incident (covered previously here and here):

There’s been considerable discussion on the international legal aspects of the incident.

1. Duncan Hollis, over on Opinio Juris, takes a look at the incident through the prism of the SS Lotus case decided by the PCIJ.

2. A debate in The Hindu captures the essential position and arguments both for and against the jurisdiction of Indian courts over the Italian marines. Samir Saran and Samya Chatterjee argue that the Indian courts do not have jurisdiction. Prabir Purkayastha and Rishabh Bailey, referring to Article 97 of the UNCLOS and the SS Lotus judgment, argue that Indian courts “also” have jurisdiction over the incident (as opposed to exclusive jurisdiction of Italy). Finally, Samir Saran disputes the above interpretation of Article 97 and also makes a very interesting argument based on the Indian Merchant Shipping Act.

3. Meanwhile, and perhaps more importantly, Judge Gopinath of the Kerala High Court has rendered (a reasonably well crafted) judgment in the writ petition filed by the Italian marines arguing that Indian courts do not have jurisdiction. The Court ruled that the Indian courts can exercise jurisdiction over the Italian marines under the Indian Penal Code and the Code of Criminal Procedure as they were within India’s contiguous/exclusive economic zone. It addressed a number of other important matters such as the sovereign immunity of the marines (held no sovereign immunity), the “compatibility” of several national laws (including the SUA Act) with the UNCLOS (held are “compatible”), and the relevance of past precedence (the Raymund Genacio case — differentiated on facts). Particularly interesting is the Court’s interpretation of the UNCLOS. For example, in defining valid exercise of sovereign authority by India in the territorial-, contiguous-, and exclusive economic zones under the UNCLOS, it notes:

To hold that a coastal state has no right whatsoever to protect its nationals exercising their legitimate rights inside the coastal state’s CZ/EEZ, would be nothing but a total travesty of justice and an outrageous affront to the nation’s sovereignty. Such a view would mean that any day, any passing-by ship can simply shoot and kill, at its will, fishermen engaged in earning their livelihood; and then get away with its act on the ground that it happened beyond the territorial waters of the coastal state. Such a view will not merely be a bad precedent, but a grossly unjust one, and will go against all settled principles of law. (para. 33)

At the WTO:

1. On 25 June, the DSB established a Panel with standard terms of reference in the poultry dispute between the US (complainant) and India (DS430: India — Measures Concerning the Importation of Agricultural Products).

2. According to news reports, the US has threatened to challenge India’s compulsory license for Nexavar at the WTO. This comes after reports that India’s commerce minister had defended the WTO consistency of the license.

Bilateral Investment Treaties/Arbitration:

1. The Sistema dispute appears to be moving forward, with the six-month notice period nearing its end and the selection of a legal team by India. Several names have been suggested, including Mr. Rodman Bundy, Prof. Donald McRae and Senior Advocate A K Ganguli.

2. Several NGO’s have written a letter to Prime Minister Manmohan Singh expressing concern over the ongoing US-India BIT negotiations. Their main attack appears to be against investor-state dispute settlement provisions.

3. In Nepal, a breakaway faction of the Unified Communist Party of Nepal (Maoist) has said that it will work towards scrapping of the recently concluded BIT with India.

4. The latest on the Vodafone BIT dispute is that it is moving forward with India not agreeing to Vodafone’s demands. Reports suggest that Prime Minister Singh would soon take a decision on Vodafone’s plea “seeking an undertaking that the [retrospective] amendment would not apply to it.”

And, finally, here’s the quote of the summer by none other than India’s (“underachieving“) Prime Minister:

“there are no international solutions to India’s problems”

– Prime Minister Manmohan Singh, returning from his trip to Los Cabos for the G20 and Rio.

In response to Vodafone filing a notice of dispute against India under the India-Netherlands BIT, here is India’s initial response as per a news report:

Referring to the recent threat of Vodafone to invoke bilateral investment treaty with the Netherlands on the tax issue, the official said the arbitration clause in the BIPA (Bilateral Investment Protection Agreement) cannot apply in Vodafone-Hutchison deal as it was signed in Cayman islands.

“The deal happened in Cayman islands and they are invoking India-Netherlands BIPA,” the finance ministry official said, adding “while in the Supreme Court Vodafone said that the deal happened outside India, under BIPA it is saying it has made substantial investment in India.”

Under the BIT, an “investment” for the purposes of jurisdiction of the arbitral tribunal exists if there an “asset invested in accordance with the national laws and regulations of the Contracting Party in the territory of which the investment is made….” Article 1(a) also provides the usual inclusive listing of what constitutes “investment” for the purposes of the BIT.

The notice of dispute is not publicly available. As per the Vodafone press release, however:

The dispute arises from the retrospective tax legislation proposed by the Indian government which, if enacted, would have serious consequences for a wide range of Indian and international businesses, as well as direct and negative consequences for Vodafone. The proposed legislation would also countermand the verdict of the Indian Supreme Court in January 2012, which ruled that Vodafone had no liability to account for withholding tax on its acquisition of indirect interests in Hutchison Essar Limited in 2007.

…

Vodafone believes that the retrospective tax proposals amount to a denial of justice and a breach of the Indian government’s obligations under the BIT to accord fair and equitable treatment to investors.

The Dispute Settlement Process under the India-Netherlands BIT:

Whatever the political and domestic ramifications of the dispute in India, the dispute settlement process under international investment law has now been triggered. Specifically, Article 9 of the India-Netherlands BIT provides that by notifying the host-state of its “intentions”, the investor can trigger the dispute settlement mechanism under the BIT. Once such a notice is served (as has been by Vodafone), the treaty provides for a 3 month period of negotiations for the amicable settlement of the dispute. If negotiations fail to resolve the dispute within 3 months, conciliation may be resorted to if both parties so agree. Otherwise, or in case the conciliation proceedings are terminated at any stage, arbitration proceedings are initiated under Article 9(3) of the BIT, being in all likelihood, an UNCITRAL arbitration before an ad hoc arbitral tribunal.

On the alternatives to arbitration generally:

For what its worth, Vodafone’s official press release is quite aggressively worded. As I’ve noted above, the treaty text makes an explicit reference to the first 3 months as a period for negotiations for the amicable settlement of the dispute (Article 9(1)). In fact, as per Article 9(1), the “intention” behind the first notice of dispute should be to negotiate an amicable settlement. According to Vodafone, however, this notice “is the first step required prior to the commencement of international arbitration under the Bilateral Investment Treaty”. The fact that Vodafone sees this notice not as a sign of engaging in negotiations, but only as a precursor to the arbitration suggests an eagerness on part of Vodafone to resort to arbitration, and a disinterest in settling amicably.

On how this relates to the larger issue of the space for less-adversarial means of dispute settlement under BITs, I refer you to this recent UNCTAD study on the alternatives to arbitration as a means for the settlement of investor-state dispute settlement provision. (In particular, see Prof. Michael Reisman’s remarks on p.22, and the commentary by Lisa Bingham on p.33).

To pique your curiosity, here’s a quote from Prof. Reisman’s piece:

Ironically, what international lawyers proudly point to as a significant systemic progression, the ADR community seems to view as a problem. ADR proponents appear to believe that there is too much third-party dispute resolution [investment arbitration] in the field of international investment. In point of fact, there is actually very little, and much of it is already being disposed of through informal settlement. The above-stated number 318, which seems enormous in comparison to other international judicial or arbitral instances (for example the dockets of the Permanent Court of International Justice, the International Court of Justice, and the Permanent Court of Arbitration) must be put into context. The gross amount of foreign direct investment is very large, indeed greater than the volume of world trade. There are approximately 80,000 multinational enterprises, which are by definition foreign direct investors. These entities have some 100,000 affiliates. If these 180,000 potential claimants are factored by the number of BITs, bearing in mind that many of these entities are multiple foreign direct investors and that not every foreign direct investor is a multinational enterprise, then the number of actual disputes going to arbitration seems to be a miniscule fraction of the universe of foreign direct investment.

Norwegian telecom operator Telenor, faced with the prospect of its Indian joint venture losing 22 2G mobile licences due to the Supreme Court judgment in the 2G case, has filed a notice of dispute against India under the India-Singapore BIT seeking damages to the tune of USD 14 billion: Economic Times. [With a notice of dispute already filed by the Russian company Sistema against India, this makes it two investment treaty disputes arising out of the Supreme Court’s 2G judgment]

WTO Disputes

India is preparing to file a dispute against the US at the WTO over the visa fee charged by the latter for Indian software companies. The claim: “discrimination” against the Indian software companies which are being asked to pay higher H1B and L1 visa fee for their employees than the American firms for bringing more number of skilled immigrants to their country at lesser costs: Economic Times.

The US called upon India to accede to the government procurement agreement — a plurilateral WTO agreement.

The US and EU have come out against the local content requirements in India’s Jawaharlal Nehru Solar Mission, which requires requires solar mission investors to use Indian manufactured solar modules and source 30 percent of their inputs from India: Hindustan Times. The Indian government is already reported to be preparing its strategy in case a dispute is filed at the WTO.

The Indian government has confirmed that it will be directing Indian airlines not to participate in the EU’s controversial aviation emissions rule. (Recall that China has already boycotted the EU scheme, as well): ICTSD.

After a visit to Kashmir, rhe UN Special Rapporteur on extrajudicial, summary or arbitrary executions stated that the Indian Armed Forces (Special Powers) Act has become a symbol of “excessive state power” and has “no role to play in a democracy”: NDTV, Hindustan Times. The official press release can be found here.

BRICS

The past week saw the leaders from Brazil, Russia, India, China and South Africa assemble in Delhi for the fourth BRICS Summit. The theme of the summit was “BRICS Partnership for Global Stability, Security and Prosperity”.

The countries were called upon to support a common developing country candidate as the successor of DG Lamy.

In addition, the heads of state of the BRICS countries signed two agreements supporting trade in local currencies between them. The two agreements are: (i) the Master Agreement on Extending Credit Facility in Local Currencies; and, (ii) the BRICS Multilateral Letter of Credit Confirmation Facility Agreement. More details can be found in a MEA document here.

In culmination of the summit, the BRICS countries issued the “Delhi Declaration“. Here are some excerpts from the Declaration:

On the Doha Round at the WTO:

16. We will continue our efforts for the successful conclusion of the Doha Round, based on the progress made and in keeping with its mandate. Towards this end, we will explore outcomes in specific areas where progress is possible while preserving the centrality of development and within the overall framework of the single undertaking. We do not support plurilateral initiatives that go against the fundamental principles of transparency, inclusiveness and multilateralism. We believe that such initiatives not only distract members from striving for a collective outcome but also fail to address the development deficit inherited from previous negotiating rounds. Once the ratification process is completed, Russia intends to participate in an active and constructive manner for a balanced outcome of the Doha Round that will help strengthen and develop the multilateral trade system.

On Syria:

21. We express our deep concern at the current situation in Syria and call for an immediate end to all violence and violations of human rights in that country. Global interests would best be served by dealing with the crisis through peaceful means that encourage broad national dialogues that reflect the legitimate aspirations of all sections of Syrian society and respect Syrian independence, territorial integrity and sovereignty. Our objective is to facilitate a Syrian-led inclusive political process, and we welcome the joint efforts of the United Nations and the Arab League to this end. We encourage the Syrian government and all sections of Syrian society to demonstrate the political will to initiate such a process, which alone can create a new environment for peace. We welcome the appointment of Mr. Kofi Annan as the Joint Special Envoy on the Syrian crisis and the progress made so far, and support him in continuing to play a constructive role in bringing about the political resolution of the crisis.

On Iran:

22. The situation concerning Iran cannot be allowed to escalate into conflict, the disastrous consequences of which will be in no one’s interest. Iran has a crucial role to play for the peaceful development and prosperity of a region of high political and economic relevance, and we look to it to play its part as a responsible member of the global community. We are concerned about the situation that is emerging around Iran’s nuclear issue. We recognize Iran’s right to peaceful uses of nuclear energy consistent with its international obligations, and support resolution of the issues involved through political and diplomatic means and dialogue between the parties concerned, including between the IAEA and Iran and in accordance with the provisions of the relevant UN Security Council Resolutions.

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